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    The Green Protocol

    By Keith R | September 6, 2008

    Topics: Corporate Social Responsibility, Environmental Protection | No Comments »

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    A few weeks ago a press release from Brazil’s National Development Bank (BNDES) came across my desk trumpeting its signing with the Environment Minister of an agreement on supporting sustainable development dubbed “The Green Protocol.”  I confess that I didn’t even scan it properly.  Instead I filed it away to examine later, guessing (wrongly) that it was some sort of national knock-off of the international social-environmental Equator Principles for project finance, perhaps intended to deflect environmentalist criticisms of certain BNDES loans.

    I should have known better, and I apologize to my Brazilian friends for jumping to conclusions.

    Now that I have had time to look into it, I find out that I erred on so many levels.  First off, the Green Protocol was not inspired by the Equator Principles.  In point of fact, the original Green Protocol preceded the Equator Principles by about eight years — it was concluded in 1995, the Principles in 2003.  This Protocol just signed, good for five years (but can be extended), is an update and revision of the original.

    Second, the Protocol involves more than just BNDES.  Also signing the Green Protocol were all the other banks either owned by the national government or in which the government owns a major interest:

    I don’t know the precise percentages, but I do know that together these banks represent a considerable chunk of the financial sector in Brazil.

    Third, the Green Protocol is not just a knock-off of the Equator Principles or vice-versa.  There may be some overlap, but their content and intent are not identical.  For one, the Principles apply just to processing, assessing and implementing projects.  The Protocol seeks not only how these banks look at loans, but also what kind of loans they finance, the terms they offer, the policies and practices they adopt for their own operations, procedural harmonization between the banks and promotion of changes among the practices of their clients.  It also promotes continual dialogue with stakeholders and regular updating/improvement of the Protocol.

    The Protocol’s Commitments

    Just what are the Protocol’s specific commitments?  There are 17 in all:

    1. Give priority in their portfolio of banking products and services to financing activities and projects with socio-environmental additionalities;
    2. Offer differentiated financing conditions (rates, maturity, grace period, eligibility criteria, etc.) for projects with socio-environmental additionalities;
    3. Orienting the recipients of credit on how to adopt sustainable consumption and production practices.
    4. condition the financing of potentially or actually polluting enterprises and activities that utilize natural resources in their production processes, on obtaining the appropriate environmental license;
    5. incorporate socio-environmental criteria in the process of analyzing and conceding credit for investment projects, considering the magnitude of their impacts and risks and the necessity of mitigating and compensating measures;
    6. conduct a socio-environmental analysis of clients whose activities require an environmental license and/or represent significant adverse social impacts;
    7. consider in the credit analysis the recommendations and restrictions of environmental zoning;
    8. develop and apply, jointly, socio-environmental management standards for productive sectors to aid the evaluation of projects with medium or high negative impacts;
    9. define and contemplate socio-environmental criteria in its own contracting of goods and services;
    10. rationalize operational procedures with a view to promoting the maximum efficiency in their use of natural resources and materials derived therefrom;
    11. promote incentives to waste reduction, reuse, recycling and proper disposal in their own operations, with a view to minimizing the potential negative environmental impacts;
    12. train personnel to develop the necessary competence to implement the Protocol;
    13. develop mechanisms for consultation and dialogue with stakeholders;
    14. commit to publish annually the results of implementing the Protocol’s principles and directives;
    15. implement governance mechanisms involving the Protocol signatories in order to exchange experiences, track its effectiveness and propose improvements in the implementation process and the evolution of the Protocol itself;
    16. develop a model of a standardized approach to improving socio-environmental reporting by clients;
    17. realize every two years a revision of the principles and directives of the Protocol in order to perfect it.

    Not a bad set of commitments.  The key, of course, is how these banks implement them and the transparency and accountability with which they do so.  I, for one, will be watching and taking notes.

    Why Not Other Public Banks in LAC?

    As I read through the Protocol, I couldn’t help but wonder why other state-owned or state-linked banks in Latin America and the Caribbean (LAC) have made similar public, codified commitments.  If BNDES, BB, BASA, BNB and Caixa can make such a commitment, why not the Banco de Costa Rica (BCR), Banco de la Nacion Argentina (BNA), the Dominican Republic’s BanReservas, or Chile’s BancoEstado, just to name a few?

    I bet that if the Environment Ministers of those countries pressed hard enough (and perhaps publicly enough), they could negotiate and win such a covenant.  The Brazilians could advise them on the contents, or if they’d rather not work with a brother Latin American, the UN Environment Programme’s (UNEP) Financial Initiative (UNEP FI) would be more than happy to assist.

    ¿Qué piensan Uds.?

    Should All LAC State-Owned Banks Adopt/Implement a Similar Green Protocol?

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    Desde o Banco Nacional (BNDES):

    BNDES adere a novo Protocolo Verde e reitera seu compromisso com preservação ambiental

    O objetivo do Protocolo é definir políticas e práticas bancárias precursoras, multiplicadoras e exemplares em termos de responsabilidade sócio-ambiental e em harmonia com o desenvolvimento sustentável. O documento é uma atualização dos compromissos previstos no Protocolo Verde firmado em 1995. Os Bancos participantes reconhecem que podem cumprir papel fundamental na orientação de investimentos privados que pressuponham preservação ambiental e contínua melhoria do bem estar da sociedade.

    Em função disso, os signatários do Protocolo se comprometem a financiar o desenvolvimento com sustentabilidade, por meio de linhas de crédito e programas que promovam qualidade de vida da população e proteção ambiental.

    Entre as principais diretrizes do programa estão:

    1 – Condições especiais de financiamentos, como taxas, prazos e carências diferenciadas, para projetos que contemplem investimentos sócio-ambientais. Além disso, os bancos signatários do Protocolo se comprometem a orientar o tomador de crédito a adotar práticas de produção e consumo sustentáveis.

    2 – Considerar os impactos e custos sócio-ambientais na gestão de ativos (próprios e de terceiros) e nas análises de risco de clientes e de projetos de investimento, tendo por base a Política Nacional de Meio Ambiente.

    3 – Incorporar critérios sócio-ambientais ao processo de análise e concessão de crédito para projetos de investimentos, considerando a magnitude de seus impactos e riscos e a necessidade de medidas mitigadoras e compensatórias.

    4 – Efetuar a análise sócio-ambiental de clientes cujas atividades exijam o licenciamento ambiental e/ou que representem significativos impactos sociais adversos;

    5 – Promover o consumo sustentável de recursos naturais, e de materiais deles derivados, nos processos internos.

    6 – Informar, sensibilizar e engajar continuamente as partes interessadas nas políticas e práticas de sustentabilidade da instituição.

    7 – Promover a harmonização de procedimentos, cooperação e integração de esforços entre as organizações signatárias na implementação destes Princípios, como adotar mecanismo de governança, propor melhorias no processo e acompanhar sua evolução.

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